Assessment Question Week 2 and 3 Demand and Supply, and Elasticity Question 1 7 Marks Due to inflation in Australia in December 2019, the price for petrol increased from AUD 1.35 to AUD 1.45. This caused petrol consumption to decrease from 2500 litres to 2450 litres at a 7-Eleven Petrol Station in Sydney. Also, when the price for Hyundai 7.5kW Inverter Split System Air Conditioner (Reverse Cycle) increased from AUD 950.00 to AUD 990.00; demand for these air conditioners fell from 2500 units to 2000 units. Following this condition, answer the questions below. i. Using the mid-point formula calculate the price elasticity of demand for petrol and Hyundai 7.5kW Inverter Split System Air Conditioner (Reverse Cycle). (2 Marks) ii. Is the price elasticity of demand: elastic, unit elastic or inelastic for each commodity (petrol and Hyundai 7.5kW Inverter Split System Air Conditioner (Reverse Cycle)? (2 Marks) iii. Suppose the government decides to increase tax for petrol and Hyundai 7.5kW Inverter Split System Air Conditioner (Reverse Cycle). Use two diagrams to explain the incidence of the tax increase for each commodity. (3 Marks) Assessment Question Week 4: Production costs Question 2 7 MARKS James was a high school teacher earning a net salary of $4500 per month. After working for one year, he quit his job to start his own kiosk business dealing in various consumer goods. In order to learn how to run the business, James enrolled in a TAFE to acquire accounting skills. James' course was for 6 months. James had to pay $3,000 as tuition for the 3 months. After the training, James borrowed $40,000.00 from his uncle whom he pays 8 percent interest per year. Also, James withdrew $ 50,000 from his savings account. He had been earning 5 percent interest per year for this account. Further, to start the business James used his own premises given to him by his father. His father had been receiving $11,000 from rent per year. Finally, to start the business James uses $75,000 he had been given by his father to go on holiday to USA. James's first year of business can be summarised as follows: 4 HI5003 Economics for Business -2020 T3 Tutorial Submission Assessment Item Amount $ Revenue- Orange section 250,000 Revenue- Beverages Section 180,000 2 Cashiers expense (wages per worker) (40,000) Mid-year revenue 100,000 Truck expense (80,000) Manager expense (60,000) Milk sales assistant expense (30,000) Equipment expense (50,000) Motorcycle expense to ease movement in city (30,000) Based on your calculations of accounting profit and economic profit, would you advise James to return to his teaching job or keep his kiost job? Show your work! Assessment Question Week 5 and 6: Market structure Question 3 11 Marks The graph below represents sales per week of ABC Inc. Ltd, a monopoly multinational enterprise that supplies Hi-tech components. Use the graph to answer the questions that follow. 5 HI5003 Economics for Business -2020 T3 Tutorial Submission Assessment i. State the elasticity of the monopoly firm demand curve. (1 Mark) ii. Considering the figure, examine the benefits of the characteristics of the monopoly demand curve to ABC Inc. Ltd. (3 Marks) iii. Suppose the demand and cost curves result in ABC Inc. Ltd earning an economic profit. Do you think ABC Inc. Ltd firm will earn profit in the longrun? Explain your answer. Assume all factors constant. (4 Marks) iv. Examine the effects of ABC Inc. Ltd on consumers. (3 Marks) Assessment Question Week 7 and 8 Measuring the size of the economy Question 4 7 Marks The table below is extracted from Happy land Republic, Bureau of Statistics records for 2018-2019. Use the information in this table to answer the questions that follow. i. Calculate Happy Land Republic's nominal GDP and real GDP in 2016 (4 Marks) ii. Why does real GDP always defer from nominal GDP? (3 Marks) Assessment Question Week 9 and 10: Inflation and unemployment, and Macro economics Question 5 Marks 11 i. Use two diagrams to explain the effects of the determinants of aggregate demand on real GDP in a nation. (8 Marks) ii. Suppose there is an expectation of a rapid general price increase in goods and services in Australia in January 2021. Examine the effects of the anticipated general rapid increase in price for goods and services. (3 Marks) Item Base year (2015) 2016 Production Price Production Price Used car sales 5,000 2000.00 6,000 2,500 Factory components sales 8,000 500.00 10,000 1200.00 Cloth sales 8,000 20.00 14,000 35.00 Beef sales 1,500 10.00 1,800 12.00 Milk litres sales 5,000 1.30 6,000 2.50 Computers sales 2000 500.00 2500 800.00 Printers sales 500 300.00 400 355.00 Raw materials for tractor assembling plant sales 4500 250.00 4450 300.00 6 HI5003 Economics for Business -2020 T3 Tutorial Submission Assessment Assessment Question Week 11 Monetary policy Question 67 Marks The government of Australia has embarked on various policies such as Job Keeper and provision of subsidies to firms in order to reduce the severity of COVID 19 on the economy. Suppose the money supply expands such that the Reserve Bank predicts that the economic expansion is not sustainable. Use two diagrams one for the money market and another for the goods and services (Aggregate demand and Aggregate Supply model), to explain the policy that the Reserve Bank can adopt in order to overcome the effect of increasing money supply on the economy. Assume that: money supply increased from the equilibrium of AUD 40 billion to AUD 70 billion Interest was reduced to interest rate of 1.5% as part of the stimulus package for the nation to overcome the effects of COVID 19. But the equilibrium interest rate is 4% Assume that equilibrium real GDP is AUD 60 billion Assume that inflation during COVID crisis was at equilibrium price of CPI 65 Assume that to overcome the inflationary crisis aggregate demand has to reduce by AUD 30 billion. Assume to restore the economy to equilibrium inflation has to be adjusted to CPI 120 This is the completion of the tutorial